SEC Filing | Vail Resorts, Inc.

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mtn-20230131

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended January 31, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-09614

https://cdn.kscope.io/f38b2274b7aa95db998cc82704dfa176-mtn-20230131_g1.jpg

Vail Resorts, Inc.

(Exact Name of Registrant as Specified in Its Charter)


Delaware		51-0291762
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

390 Interlocken Crescent
Broomfield,	Colorado	80021
(Address of Principal Executive Offices)		(Zip Code)


(303)			404-1800
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock, $0.01 par value	MTN	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes ☐ No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes ☐ No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☒

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes ☒ No

As of March 6, 2023, 40,330,446 shares of the registrant’s common stock were outstanding.

Table of Contents



PART I	FINANCIAL INFORMATION	Page

Item 1.	Financial Statements (unaudited).
	Consolidated Condensed Balance Sheets as of January 31, 202 3 , July 31, 2022 and January 31, 20 2 2	2
	Consolidated Condensed Statements of Operations for the Three and Six Months Ended January 31, 202 3 and 20 2 2	3
	Consolidated Condensed Statements of Comprehensive Income for the Three and Six Months Ended January 31, 202 3 and 20 2 2	4
	Consolidated Condensed Statements of Stockholders’ Equity for the Three an d Six Months Ended January 31, 202 3 and 20 2 2	5
	Consolidated Condensed Statements of Cash Flows for the Six Months Ended January 31, 202 3 and 20 2 2	7
	Notes to Consolidated Condensed Financial Statements	8
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	43

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	43
Item 3.	Defaults Upon Senior Securities	43
Item 4.	Mine Safety Disclosures	43
Item 5.	Other Information	43
Item 6.	Exhibits	44

Vail Resorts, Inc.

Consolidated Condensed Balance Sheets

(In thousands, except per share amounts)

(Unaudited)


	January 31, 2023		July 31, 2022		January 31, 2022
Assets
Current assets:
Cash and cash equivalents	$	1,295,252	$	1,107,427	$	1,407,019
Restricted cash	24,103		18,680		15,643
Trade receivables, net	160,393		383,425		167,088
Inventories, net	122,088		108,723		104,573
Other current assets	158,295		173,277		73,104
Total current assets	1,760,131		1,791,532		1,767,427
Property, plant and equipment, net (Note 7)	2,421,395		2,118,052		2,190,332
Real estate held for sale or investment	90,354		95,983		95,331
Goodwill, net (Note 7)	1,723,019		1,754,928		1,764,106
Intangible assets, net	310,666		314,058		318,078
Operating right-of-use assets	200,667		192,070		198,672
Other assets	58,730		51,405		35,796
Total assets	$	6,564,962	$	6,318,028	$	6,369,742
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable and accrued liabilities (Note 7)	$	1,144,795	$	942,830	$	1,067,137
Income taxes payable	73,559		104,275		24,153
Long-term debt due within one year (Note 5)	69,582		63,749		63,746
Total current liabilities	1,287,936		1,110,854		1,155,036
Long-term debt, net (Note 5)	2,789,827		2,670,300		2,695,589
Operating lease liabilities	184,298		174,567		188,797
Other long-term liabilities	237,478		246,359		254,209
Deferred income taxes, net	288,072		268,464		282,427
Total liabilities	4,787,611		4,470,544		4,576,058
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.01 par value, 25,000 shares authorized, no shares issued and outstanding	—		—		—
Common stock, $0.01 par value, 100,000 shares authorized, 46,795, 46,744 and 46,713 shares issued, respectively	468		467		467
Exchangeable shares, $0.01 par value, 0, 3 and 33 shares issued and outstanding, respectively (Note 4)	—		—		—
Additional paid-in capital	1,112,519		1,184,577		1,172,595
Accumulated other comprehensive (loss) income	(8,565)		10,923		10,418
Retained earnings	837,573		895,889		786,473
Treasury stock, at cost, 6,466, 6,466 and 6,161 shares, respectively (Note 11)	(479,417)		(479,417)		(404,411)
Total Vail Resorts, Inc. stockholders’ equity	1,462,578		1,612,439		1,565,542
Noncontrolling interests	314,773		235,045		228,142
Total stockholders’ equity	1,777,351		1,847,484		1,793,684
Total liabilities and stockholders’ equity	$	6,564,962	$	6,318,028	$	6,369,742

The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.

Vail Resorts, Inc.

Consolidated Condensed Statements of Operations

(In thousands, except per share amounts)

(Unaudited)


	Three Months Ended January 31,				Six Months Ended January 31,
	2023		2022		2023		2022
Net revenue:
Mountain and Lodging services and other	$	901,837	$	770,300	$	1,112,223	$	892,160
Mountain and Lodging retail and dining	192,182		136,055		261,130		189,456
Resort net revenue	1,094,019		906,355		1,373,353		1,081,616
Real Estate	7,699		180		7,812		495
Total net revenue	1,101,718		906,535		1,381,165		1,082,111
Operating expense (exclusive of depreciation and amortization shown separately below):
Mountain and Lodging operating expense	507,216		364,336		749,502		548,061
Mountain and Lodging retail and dining cost of products sold	75,431		53,715		110,516		77,944
General and administrative	116,616		91,261		215,415		168,495
Resort operating expense	699,263		509,312		1,075,433		794,500
Real Estate operating expense	6,310		1,511		7,692		2,981
Total segment operating expense	705,573		510,823		1,083,125		797,481
Other operating (expense) income:
Depreciation and amortization	(65,989)		(62,070)		(130,603)		(123,559)
Gain on sale of real property	757		931		757		962
Change in estimated fair value of contingent consideration (Note 8)	(1,100)		(16,780)		(1,736)		(18,780)
(Loss) gain on disposal of fixed assets and other, net	(1,780)		7,347		(1,786)		16,214
Income from operations	328,033		325,140		164,672		159,467
Mountain equity investment income, net	42		818		388		2,332
Investment income and other, net	7,108		257		9,994		756
Foreign currency gain (loss) on intercompany loans (Note 5)	2,338		(2,870)		(3,797)		(2,039)
Interest expense, net	(38,370)		(37,366)		(73,672)		(76,911)
Income before (provision for) benefit from income taxes	299,151		285,979		97,585		83,605
(Provision for) benefit from income taxes	(79,032)		(52,049)		(21,026)		7,804
Net income	220,119		233,930		76,559		91,409
Net income attributable to noncontrolling interests	(11,440)		(10,539)		(4,851)		(7,350)
Net income attributable to Vail Resorts, Inc.	$	208,679	$	223,391	$	71,708	$	84,059
Per share amounts (Note 4):
Basic net income per share attributable to Vail Resorts, Inc.	$	5.17	$	5.51	$	1.78	$	2.08
Diluted net income per share attributable to Vail Resorts, Inc.	$	5.16	$	5.47	$	1.77	$	2.06
Cash dividends declared per share	$	1.91	$	0.88	$	3.82	$	1.76

The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.

Vail Resorts, Inc.

Consolidated Condensed Statements of Comprehensive Income

(In thousands)

(Unaudited)


	Three Months Ended January 31,				Six Months Ended January 31,
	2023		2022		2023		2022
Net income	$	220,119	$	233,930	$	76,559	$	91,409
Foreign currency translation adjustments	82,468		(48,857)		(35,340)		(33,720)
Change in estimated fair value of hedging instruments, net of tax	(2,787)		4,483		5,220		8,828
Comprehensive income	299,800		189,556		46,439		66,517
Comprehensive (income) loss attributable to noncontrolling interests	(30,778)		(436)		5,781		161
Comprehensive income attributable to Vail Resorts, Inc.	$	269,022	$	189,120	$	52,220	$	66,678

The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.

Vail Resorts, Inc.

Consolidated Condensed Statements of Stockholders’ Equity

(In thousands)

(Unaudited)


	Common Stock				Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Total Vail Resorts, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
	Vail Resorts		Exchangeable
Balance, October 31, 2021	$	466	$	—	$	1,192,901	$	44,689	$	598,796	$	(404,411)	$	1,432,441	$	233,989	$	1,666,430
Comprehensive income:
Net income	—		—		—		—		223,391		—		223,391		10,539		233,930
Foreign currency translation adjustments	—		—		—		(38,754)		—		—		(38,754)		(10,103)		(48,857)
Change in estimated fair value of hedging instruments, net of tax	—		—		—		4,483		—		—		4,483		—		4,483
Total comprehensive income													189,120		436		189,556
Stock-based compensation expense	—		—		6,479		—		—		—		6,479		—		6,479
Issuance of shares under share award plans, net of shares withheld for employee taxes	1		—		(26,785)		—		—		—		(26,784)		—		(26,784)

Dividends (Note 4)	—		—		—		—		(35,714)		—		(35,714)		—		(35,714)
Distributions to noncontrolling interests, net	—		—		—		—		—		—		—		(6,283)		(6,283)
Balance, January 31, 2022	$	467	$	—	$	1,172,595	$	10,418	$	786,473	$	(404,411)	$	1,565,542	$	228,142	$	1,793,684

Balance, October 31, 2022	$	468	$	—	$	1,106,813	$	(68,908)	$	705,923	$	(479,417)	$	1,264,879	$	286,839	$	1,551,718
Comprehensive income:
Net income	—		—		—		—		208,679		—		208,679		11,440		220,119
Foreign currency translation adjustments	—		—		—		63,130		—		—		63,130		19,338		82,468
Change in estimated fair value of hedging instruments, net of tax	—		—		—		(2,787)		—		—		(2,787)		—		(2,787)
Total comprehensive income													269,022		30,778		299,800
Stock-based compensation expense	—		—		6,844		—		—		—		6,844		—		6,844
Issuance of shares under share award plans, net of shares withheld for employee taxes	—		—		(1,138)		—		—		—		(1,138)		—		(1,138)

Dividends (Note 4)	—		—		—		—		(77,029)		—		(77,029)		—		(77,029)


Distributions to noncontrolling interests, net	—		—		—		—		—		—		—		(2,844)		(2,844)
Balance, January 31, 2023	$	468	$	—	$	1,112,519	$	(8,565)	$	837,573	$	(479,417)	$	1,462,578	$	314,773	$	1,777,351


	Common Stock				Additional Paid in Capital		Accumulated Other Comprehensive Income (Loss)		Retained Earnings		Treasury Stock		Total Vail Resorts, Inc. Stockholders’ Equity		Noncontrolling Interests		Total Stockholders’ Equity
	Vail Resorts		Exchangeable
Balance, July 31, 2021	$	466	$	—	$	1,196,993	$	27,799	$	773,752	$	(404,411)	$	1,594,599	$	234,469	$	1,829,068
Comprehensive income:
Net income	—		—		—		—		84,059		—		84,059		7,350		91,409
Foreign currency translation adjustments	—		—		—		(26,209)		—		—		(26,209)		(7,511)		(33,720)
Change in estimated fair value of hedging instruments, net of tax	—		—		—		8,828		—		—		8,828		—		8,828
Total comprehensive income													66,678		(161)		66,517

Stock-based compensation expense	—		—		12,904		—		—		—		12,904		—		12,904
Issuance of shares under share award plans, net of shares withheld for employee taxes	1		—		(37,302)		—		—		—		(37,301)		—		(37,301)

Dividends (Note 4)	—		—		—		—		(71,338)		—		(71,338)		—		(71,338)
Distributions to noncontrolling interests, net	—		—		—		—		—		—		—		(6,166)		(6,166)
Balance, January 31, 2022	$	467	$	—	$	1,172,595	$	10,418	$	786,473	$	(404,411)	$	1,565,542	$	228,142	$	1,793,684

Balance, July 31, 2022	$	467	$	—	$	1,184,577	$	10,923	$	895,889	$	(479,417)	$	1,612,439	$	235,045	$	1,847,484
Comprehensive income:
Net income	—		—		—		—		71,708		—		71,708		4,851		76,559
Foreign currency translation adjustments	—		—		—		(24,708)		—		—		(24,708)		(10,632)		(35,340)
Change in estimated fair value of hedging instruments	—		—		—		5,220		—		—		5,220		—		5,220
Total comprehensive income													52,220		(5,781)		46,439
Stock-based compensation expense	—		—		13,189		—		—		—		13,189		—		13,189
Issuance of shares under share award plans, net of shares withheld for employee taxes	1		—		(5,181)		—		—		—		(5,180)		—		(5,180)

Dividends	—		—		—		—		(154,047)		—		(154,047)		—		(154,047)
Cumulative effect of adoption of ASU 2020-06 (Notes 2 & 5)	—		—		(80,066)		—		24,023		—		(56,043)		—		(56,043)
Estimated acquisition date fair value of noncontrolling interests (Note 6)	—		—		—		—		—		—		—		91,524		91,524
Distributions to noncontrolling interests, net	—		—		—		—		—		—		—		(6,015)		(6,015)
Balance, January 31, 2023	$	468	$	—	$	1,112,519	$	(8,565)	$	837,573	$	(479,417)	$	1,462,578	$	314,773	$	1,777,351

The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.

Vail Resorts, Inc.

Consolidated Condensed Statements of Cash Flows

(In thousands)

(Unaudited)


	Six Months Ended January 31,
	2023		2022
Cash flows from operating activities:
Net income	$	76,559	$	91,409
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	130,603		123,559

Stock-based compensation expense	13,189		12,904
Deferred income taxes, net	19,947		9,214
Change in estimated fair value of contingent consideration	1,736		18,780

Other non-cash expense (income), net	866		(602)
Changes in assets and liabilities:
Trade receivables, net	226,796		178,252
Inventories, net	(12,962)		(23,627)
Accounts payable and accrued liabilities	96,247		89,502
Deferred revenue	104,996		147,614

Income taxes payable	(31,166)		(7,581)
Other assets and liabilities, net	(21,318)		(28,095)
Net cash provided by operating activities	605,493		611,329
Cash flows from investing activities:
Capital expenditures	(206,554)		(128,854)
Return of deposit for acquisition of business	114,506		—
Acquisition of businesses, net of cash acquired	(38,567)		(118,099)
Investments in short-term deposits	(86,756)		—
Other investing activities, net	11,346		21,421
Net cash used in investing activities	(206,025)		(225,532)
Cash flows from financing activities:



Repayments of borrowings under Vail Holdings Credit Agreement	(31,250)		(31,250)
Repayments of borrowings under Whistler Credit Agreement	—		(23,145)
Repayment of EB-5 Development Notes	—		(51,500)
Employee taxes paid for share award exercises	(5,181)		(37,302)
Dividends paid	(154,047)		(71,338)

Other financing activities, net	(10,899)		(6,158)
Net cash used in financing activities	(201,377)		(220,693)
Effect of exchange rate changes on cash, cash equivalents and restricted cash	(4,843)		(1,016)
Net increase in cash, cash equivalents and restricted cash	193,248		164,088
Cash, cash equivalents and restricted cash:
Beginning of period	1,126,107		1,258,574
End of period	$	1,319,355	$	1,422,662

Non-cash investing activities:
Accrued capital expenditures	$	49,091	$	17,388

The accompanying Notes are an integral part of these unaudited consolidated condensed financial statements.

Vail Resorts, Inc.

Notes to Consolidated Condensed Financial Statements

(Unaudited)

1.Organization and Business

Vail Resorts, Inc. (“Vail Resorts”) is organized as a holding company and operates through various subsidiaries. Vail Resorts and its subsidiaries (collectively, the “Company”) operate in three business segments: Mountain, Lodging and Real Estate. The Company refers to “Resort” as the combination of the Mountain and Lodging segments.

In the Mountain segment, the Company operates the following 41 destination mountain resorts and regional ski areas:

https://cdn.kscope.io/f38b2274b7aa95db998cc82704dfa176-mtn-20230131_g2.jpg

*Denotes a destination mountain resort, which generally receives a meaningful portion of skier visits from long-distance travelers, as opposed to the Company’s regional ski areas, which tend to generate skier visits predominantly from their respective local markets.

Additionally, the Mountain segment includes ancillary services, primarily including ski school, dining and retail/rental operations, and for the Company’s Australian ski areas, including lodging and transportation operations.

In the Lodging segment, the Company owns and/or manages a collection of luxury hotels and condominiums under its RockResorts brand; other strategic lodging properties and a large number of condominiums located in proximity to the Company’s North American mountain resorts; National Park Service (“NPS”) concessioner properties including the Grand Teton Lodge Company, which operates destination resorts in Grand Teton National Park; a Colorado resort ground transportation company and mountain resort golf courses.

Vail Resorts Development Company, a wholly-owned subsidiary, conducts the operations of the Company’s Real Estate segment, which owns, develops and sells real estate in and around the Company’s resort communities.

The Company’s mountain business and its lodging properties at or around the Company’s mountain resorts are seasonal in nature, and typically experience their peak operating seasons primarily from mid-December through mid-April in North America and Europe. The peak operating season at the Company’s Australian resorts, NPS concessioner properties and golf courses generally occurs from June to early October.

2. Summary of Significant Accounting Policies

Basis of Presentation

Consolidated Condensed Financial Statements — In the opinion of the Company, the accompanying Consolidated Condensed Financial Statements reflect all adjustments necessary to state fairly the Company’s financial position, results of operations and cash flows for the interim periods presented. All such adjustments are of a normal recurring nature. Results for interim periods are not indicative of the results for the entire fiscal year, particularly given the significant seasonality to the Company’s operating cycle. The accompanying Consolidated Condensed Financial Statements should be read in conjunction with the audited Consolidated Financial Statements included in the Company’s Annual Report on Form 10-K for the fiscal year ended July 31, 2022. Certain information and footnote disclosures, including significant accounting policies, normally included in fiscal year financial statements prepared in accordance with accounting principles generally accepted in the U.S. (“GAAP”) have been condensed or omitted. The Consolidated Condensed Balance Sheet as of July 31, 2022 was derived from audited financial statements.

Use of Estimates — The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the balance sheet date and the reported amounts of revenue and expenses during the reporting periods. Actual results could differ from those estimates.

Fair Value of Financial Instruments — The recorded amounts for cash and cash equivalents, restricted cash, trade receivables, other current assets, accounts payable and accrued liabilities approximate fair value due to their short-term nature. The fair value of amounts outstanding under the Company’s credit agreements and the Employee Housing Bonds (as defined in Note 5, Long-Term Debt) approximate book value due to the variable nature of the interest rate associated with the debt. The recorded amount outstanding under the Company’s NRP Loan (as defined in Note 5, Long-Term Debt), which was assumed by the Company during the six months ended January 31, 2023 approximates fair value as the debt obligation was recorded at estimated fair value in conjunction with the preliminary purchase accounting for the Andermatt-Sedrun acquisition (see Note 6, Acquisitions). The estimated fair values of the 6.25% Notes and the 0.0% Convertible Notes (each as defined in Note 5, Long-Term Debt) are based on quoted market prices (a Level 2 input). The estimated fair value of the EPR Secured Notes (as defined in Note 5, Long-Term Debt) has been estimated using analyses based on current borrowing rates for debt with similar remaining maturities and ratings (a Level 2 input). The carrying values, including any unamortized premium or discount, and estimated fair values of the 6.25% Notes, 0.0% Convertible Notes and EPR Secured Notes as of January 31, 2023 are presented below (in thousands):


	January 31, 2023
	Carrying Value		Estimated Fair Value
6.25% Notes	$	600,000	$	604,062
0.0% Convertible Notes	$	575,000	$	547,339
EPR Secured Notes	$	133,305	$	161,156

Recently Issued Accounting Standards

Adopted Standards

In March 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2020-04, “Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional transition guidance, for a limited time, to companies that have contracts, hedging relationships or other transactions that reference the London Inter-bank Offered Rate (“LIBOR”) or another reference rate which is expected to be discontinued because of reference rate reform. The amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions if certain criteria are met. The amendments of ASU 2020-04 were effective as of March 12, 2020. In December 2022, the FASB issued ASU 2022-06, “Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848,” which extended the effective date of the provisions of ASU 2020-04 to December 31, 2024. The amendments in this update may be applied as of any date from the beginning of an interim period that includes or

is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020, up to the date that the financial statements are available to be issued. All other amendments should be applied on a prospective basis.

The Company is party to various interest rate swap agreements that hedge the variable interest rate component of underlying cash flows of $400.0 million in principal amount of its Vail Holdings Credit Agreement (as defined in Note 5, Long-Term Debt), which are designated as cash flow hedges. During the six months ended January 31, 2023, the Company entered into an amendment to its Vail Holdings Credit Agreement (the “Fifth Amendment”) to modify the calculation of interest under the Vail Holdings Credit Agreement from being calculated based on LIBOR to being calculated based on SOFR (see Note 5, Long-Term Debt, for additional information). Subsequent to the Fifth Amendment, the interest rate swaps were also amended to transition from a hedge of LIBOR to a hedge of SOFR. The Company elected certain optional expedients provided by Topic 848, which allowed the Company to not apply certain modification accounting requirements or reassess the previous accounting designation of the interest rate swap agreements as cash flow hedges.

In August 2020, the FASB issued ASU 2020-06, “Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity” which simplifies the guidance in Accounting Standards Codifications (“ASC”) 470-20, “Debt – Debt with Conversion and Other Options.” The guidance removes certain rules which required separation of the embedded conversion features from the host contract for convertible instruments. The updated guidance requires bifurcation only if the convertible debt feature qualifies as a derivative under ASC 815, “Derivatives and Hedging”, or for convertible debt issued at a substantial premium. The guidance also amends the guidance in ASC 815-40, “Derivatives and Hedging – Contracts in Entity’s Own Equity” for certain contracts in an entity’s own equity that are currently accounted for as derivatives. This standard is effective for fiscal years beginning after December 15, 2021, including interim periods within those fiscal years (the Company’s first quarter of the fiscal year ending July 31, 2023). This standard allows for a modified retrospective or fully retrospective method of transition. The Company adopted ASU 2020-06 on August 1, 2022 using the modified retrospective method, and therefore prior period financial information has not been retrospectively adjusted and continues to be reported under the accounting standards in effect for those periods.

Upon adoption of the standard, the Company reclassified the previously bifurcated equity component of its 0.0% Convertible Notes (as defined in Note 5, Long-Term Debt) to long-term debt, net, as the convertible option on the 0.0% Convertible Notes does not qualify as a derivatives under ASC 815 nor were the 0.0% Convertible Notes issued at a substantial premium. This reclassification was partially offset by an increase to retained earnings for the previously recognized non-cash interest expense, net of tax that had been recorded as a result of amortization of the previously recorded debt discount. The adoption of this new guidance eliminates the recognition of non-cash interest expense to be recognized in future periods due to removal of the debt discount associated with the 0.0% Convertible Notes.

The impact of adoption of ASU 2020-06 on the Consolidated Condensed Balance Sheet as of adoption date was as follows (in thousands):


	As of August 1, 2022
Balance Sheet	Balances without the Adoption of ASU 2020-06		Adjustments		Balances with the adoption of ASU 2020-06
Liabilities
Long term debt, net	$	2,670,300	$	74,822	$	2,745,122
Deferred income taxes, net	$	268,464	$	(18,779)	$	249,685
Stockholders’ equity
Additional paid-in capital	$	1,184,577	$	(80,066)	$	1,104,511
Retained earnings	$	895,889	$	24,023	$	919,912

ASU 2020-06 also prohibits the use of the treasury stock method for convertible instruments for the purposes of calculating diluted earnings per share (“EPS”) and instead requires application of the if-converted method. Under the if-converted method, diluted EPS will generally be calculated assuming that all of the convertible debt instruments were converted solely into shares of common stock at the beginning of the reporting period unless the result would be anti-dilutive. Pursuant to the terms of the 0.0% Convertible Notes, the principal amount of the 0.0% Convertible Notes is required to be paid in cash and only the premium due upon conversion, if any, is permitted to be settled in shares, cash or a combination of shares and cash. Consequently, for the Company the if-converted method would produce a similar result as the treasury stock method, which was utilized for the calculation of diluted EPS prior to the adoption of ASU 2020-06 for the 0.0% Convertible Notes.

3. Revenues

Disaggregation of Revenues

The following table presents net revenues disaggregated by segment and major revenue type for the three and six months ended January 31, 2023 and 2022 (in thousands):


	Three Months Ended January 31,				Six Months Ended January 31,
	2023		2022		2023		2022
Mountain net revenue:
Lift	$	592,603	$	521,582	$	652,143	$	535,911
Ski School	123,451		92,072		132,378		93,545
Dining	85,828		54,049		105,270		66,569
Retail/Rental	159,932		126,831		200,276		155,207
Other	51,628		39,841		125,092		92,443
Total Mountain net revenue	$	1,013,442	$	834,375	$	1,215,159	$	943,675
Lodging net revenue:
Owned hotel rooms	$	13,479	$	13,584	$	37,044	$	35,067
Managed condominium rooms	31,336		33,125		44,195		46,209
Dining	13,184		8,375		30,013		18,650
Transportation	5,888		5,766		7,348		7,559
Golf	—		—		5,939		5,118
Other	11,700		9,269		24,988		21,736
	75,587		70,119		149,527		134,339
Payroll cost reimbursements	4,990		1,861		8,667		3,602
Total Lodging net revenue	$	80,577	$	71,980	$	158,194	$	137,941
Total Resort net revenue	$	1,094,019	$	906,355	$	1,373,353	$	1,081,616
Total Real Estate net revenue	7,699		180		7,812		495
Total net revenue	$	1,101,718	$	906,535	$	1,381,165	$	1,082,111

Contract Balances

Deferred revenue balances of a short-term nature were $619.5 million and $511.3 million as of January 31, 2023 and July 31, 2022, respectively. For the three and six months ended January 31, 2023, the Company recognized approximately $220.1 million and $274.6 million, respectively, of revenue that was included in the deferred revenue balance as of July 31, 2022. Deferred revenue balances of a long-term nature, comprised primarily of long-term private club initiation fee revenue, were $113.3 million, $117.2 million and $120.6 million as of January 31, 2023, July 31, 2022 and January 31, 2022, respectively. As of January 31, 2023, the weighted average remaining period over which revenue for unsatisfied performance obligations on long-term private club contracts will be recognized was approximately 15 years. Trade receivables, net were $160.4 million and $383.4 million as of January 31, 2023 and July 31, 2022, respectively.

Costs to Obtain Contracts with Customers

As of January 31, 2023, $13.0 million of costs to obtain contracts with customers were recorded within other current assets on the Company’s Consolidated Condensed Balance Sheet. The amounts capitalized are subject to amortization generally beginning in the second quarter of fiscal 2023, commensurate with the revenue recognized for related pass products. The Company recorded amortization of $12.3 million for these costs during both the three and six months ended January 31, 2023, which was recorded within Mountain and Lodging operating expenses on the Company’s Consolidated Condensed Statement of Operations.

4. Net Income per Share

Earnings per Share

Basic EPS excludes dilution and is computed by dividing net income attributable to Vail Resorts stockholders by the weighted-average shares outstanding during the period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised, resulting in the issuance of shares of common stock that would then share in the earnings of Vail Resorts.

In connection with the Company’s acquisition of Whistler Blackcomb in October 2016, the Company issued consideration in the form of shares of Vail Resorts common stock (the “Vail Shares”), redeemable preferred shares of the Company’s wholly-owned Canadian subsidiary Whistler Blackcomb Holdings Inc. (“Exchangeco”) or cash (or a combination thereof). Whistler Blackcomb shareholders elected to receive 3,327,719 Vail Shares and 418,095 shares of Exchangeco (the “Exchangeco Shares”). The Exchangeco Shares could be redeemed for Vail Shares at any time until October 2023 or until the Company elected to convert any remaining Exchangeco Shares to Vail Shares, which the Company had the ability to do once total Exchangeco Shares outstanding fell below 20,904 shares (or 5% of the total Exchangeco Shares originally issued). In July 2022, the number of outstanding Exchangeco Shares fell below such threshold and on August 25, 2022, the Company elected to redeem all outstanding Exchangeco Shares, effective September 26, 2022. As of January 31, 2023, all Exchangeco Shares have been exchanged for Vail Shares. Both Vail Shares and Exchangeco Shares have a par value of $0.01 per share, and Exchangeco Shares, while they were outstanding, were substantially the economic equivalent of the Vail Shares. The Company’s calculation of weighted-average shares outstanding includes the Exchangeco Shares.

Presented below is basic and diluted EPS for the three months ended January 31, 2023 and 2022 (in thousands, except per share amounts):

Three Months Ended January 31,

2023

2022